How Much Retirement Savings Do You Really Need?

Money Magazine recently ran an article on how much you should have in retirement savings based upon your age.[1] The article suggested the following retirement savings amounts at certain ages in order to live a lifestyle in retirement comparable to your current lifestyle. It suggested you should have the following amounts in your retirement savings by the following age ranges:

Age 35-45 1.5 times your annual salary

Age 45-55 3 times your annual salary

55+ 6 times your annual salary.

This makes sense if you do not have a pension but what about those who do have pensions? How much should you save on top of your pension in order to live a comparable lifestyle to your present one when you retire?

The answer may be a little frustrating without some help. Every state has different pension plans and different rules around Social Security. In an ideal world, you could simply figure out what your pension will pay you in retirement, add Social Security, and then compare that to your salary today. In reality, pensions can be confusing and planning your retirement can be overwhelming.

Here are some things that can help you think through how much you will need to save:

1. Know your pension benefit. Most states have an online calculator or a help line to call so you can estimate what your benefit will be. If you are confused, check with your local NEA Valuebuilder® representative. Your Valuebuilder representative has planning software that can determine your pension benefits and calculate any shortfall.

2. Take a stand on the future. A study done this year by the Manhattan Institute for Policy Research reported that underfunding of teacher pensions may be triple what has been reported by the states.[2] Social Security’s underfunding has been widely publicized in recent years. The point is not to panic but to take a stand on what you believe will happen to your state pension and to Social Security. Get informed and talk with a professional financial advisor about your pension and Social Security. You may choose to trust in these retirement vehicles and do nothing. On the other hand, you may choose to prepare for the worst and reap the benefits of your caution when you retire. In addition, if you do have a Social Security benefit, consider when you will be taking it. Delaying payments by a few years can make a big difference in your income.

3. Picture yourself in retirement. How much you need depends significantly upon what you want to do, where you want to go, and the kind of lifestyle you want to lead. Perhaps the most important question is, “How does my picture of the future compare to my paycheck today?” Does your lifestyle today include vacations oversees? Trips to visit children and grandchildren? Hobbies—such as golf—that can be expensive? If so, then today’s income will likely cover tomorrow’s lifestyle. On the other hand, if your pension will pay 75% of your current paycheck, then can you really afford to live the lifestyle you want on 25% less income? If not, then you will probably need to contribute to a supplemental retirement plan that will get you closer to 100% of your pre-retirement paycheck.

4. Pay yourself first. A little sacrifice now can reap big benefits in the future. If you are not able to take a pay cut in retirement, then consider putting away a little extra now in order to supplement your pension. A small amount every paycheck over a number of years may fill the gap without having to make huge sacrifices.

How much do you really need in retirement savings? It’s the answer we hate to hear: “It depends.” There are a lot of factors that go into your number. A financial professional can help you more clearly define the number that’s right for you. If you are not sure and want help, then talk to your local NEA Valuebuilder representative. At the NEA Valuebuilder Advisor-Assisted Web page [https://nea.securitybenefit.com/neavaluebuilder/advisorassisted.htm], our “representative locator” will quickly provide contact information for trained representatives who can help you with retirement planning and making difficult decisions that affect your future.

You should carefully consider the investment objectives, risks, and charges and expenses of the mutual funds and variable annuities available under the NEA Valuebuilder Program before investing. You may obtain a prospectus that contains this and other information about the mutual funds and variable annuities by calling our National Service Center at 1-800-NEA-VALU (632-8258). You should read the prospectus carefully before investing. Investing in variable annuities and mutual funds involves risk and there is no guarantee of investment results.

The NEA Valuebuilder Program provides investment products (the “NEA Valuebuilder products”) in connection with retirement plans sponsored by school districts and other employers of NEA members and individual retirement accounts established by NEA members. Security Distributors, Inc. and certain of its affiliates (collectively “Security Benefit”) make the NEA Valuebuilder products available under this program pursuant to an agreement with NEA’s wholly-owned subsidiary, NEA’s Member Benefits Corporation (“MBC”). Security Benefit has the exclusive right to offer the NEA Valuebuilder products under the program, and MBC generally may not enter into arrangements with other providers of similar investment programs or otherwise promote to NEA members or their employers any investment products that compete with the NEA Valuebuilder products. MBC promotes the program to NEA members and their employers and provides certain services in connection with the program. Security Benefit pays an annual fee to MBC based in part on the average assets invested in the NEA Valuebuilder products under the agreement. You may wish to take into account this agreement and arrangement, including any fees paid, when considering and evaluating any communications relating to the NEA Valuebuilder products. NEA and MBC are not affiliated with Security Benefit. Neither NEA nor MBC is a registered broker-dealer. All securities brokerage services are performed exclusively by your sales representative’s broker-dealer and not by NEA or MBC.

The NEA Valuebuilder Variable Annuity TSA, Contract Form No. V6029, also includes a Fixed Account. The NEA Valuebuilder Variable Annuity TSA is distributed by Security Distributors, Inc. and is issued by Security Benefit Life Insurance Company (SBL). The NEA Valuebuilder 403(b)(7) is a Custodial Account under §403(b)(7) of the Internal Revenue Code. The NEA Valuebuilder Mutual Fund 457 is a Trust Account under §457 of the Internal Revenue Code. The NEA Valuebuilder IRA is an IRA Custodial Account under §408(a) of the Internal Revenue Code.

Annuities are long-term investments suitable for retirement.

Security Distributors, Inc. is a subsidiary of SBL and SBL is wholly owned by Security Benefit Corporation (“Security Benefit”).